Refer to the Figure Shown, Which Represents the Production Possibilities

question 8

Multiple Choice

Refer to the figure shown, which represents the production possibilities frontiers for Countries A and B. After examining the production possibilities of each country, what can we surmise about the opportunity cost of a car for Country A?

• A) It is lower than that of Country B; Country A should specialize in cars and trade with Country B for trucks.
• B) It is higher than that of Country B; Country A should specialize in cars and trade with Country B for trucks.
• C) It is the same as that of Country B; Country A will not benefit from trade and should refrain.
• D) It should have no effect on Country A's decision to trade; absolute advantage drives that decision.

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Definitions:

Economic Development

The way in which a country advances its people's economic, political, and social conditions.

GDP

Gross Domestic Product, the total value of all goods and services produced within a country over a specific period.

Service Sectors

The segment of the economy that provides intangible goods and services to consumers, including retail, education, health care, and financial services.

Poor Countries

Nations with low levels of economic productivity, low per capita income, and generally low standards of living.